Healthcare costs are on a track which can not be supported by the American economy. A significant and immediate reversal is vitally important to the country.
Much of the reason for the discouraging cost prognosis of health care is the complex, highly fragmented nature of the health care industry with thousands of diverse, competitive players.
As states, and later Medicare, run out of cash to fund claims, one solution is to curtail spending is rationing based on the resource basis of the insured. Healthcare reform in several jurisdictions, notably Massachusetts in 2006, provides for scaled assistance to the working poor.
But how are the present health care systems to do even this? Both supporters and reformers of the existing systems presume, deus ex machina, that the current enrollment and means-testing processes have a method of comparing a person's identity to his other sources of insurance, his employment or gross or net income, or of tracking those important statutory and budgetary facts after enrollment has occurred or changed. Yet, in reality, such “perfect knowledge” regarding the precise state of each of the hundreds of millions of insureds remains elusive.
Similarly, Medicare Part D, the current pharmacy plan for America's elderly, wrongly presumes that Medicare's fiscal intermediaries have access to information regarding when a patient reaches the limit of incurred pharmacy expenses to begin, end, and recommence Federal support. With no existing access to information on these billed expenses, Medicare Part D is set to become the nation's second greatest fraud on the taxpayer since Medicaid.
Other problems include some business practices so egregious that reformers felt compelled to address them with legislation, but which, too often, have been a challenge to enforce. For example, Prompt-Pay statutes have been adopted in many jurisdictions to discourage the practice among health plans of propping up their stock prices by delaying timely payment to medical providers. However, tracking the compliance of health plans with prompt-pay law is massively time consuming in a manual business process, and so in fact is rarely done.
Nor has the industry avoided complaints of fraud. In 2002, Blue Cross was prosecuted under Federal Racketeering law for systematically paying less than their contracts with providers stipulated. The racketeering case was eventually settled, but in light of the difficulty of comparing hundreds of thousands of remittance accounts on tens of thousands of billing codes to hundreds of contracts potentially covering thousands of payers, medical providers can not currently be sure that they are paid properly.
With such a huge volume of medical records stored in scores of separate, non-standardized, and often differently structured and maintained corporate files, legislation has had little impact on the performance of industry practices. HIPAA 1171-1176 or similar state law adopted under the Deficit Reduction Act of 2005, require health plans to, at a minimum, respond to eligibility inquiries and claim filing messages sent on behalf of medical providers or other health plans, notably Medicaid, Medicare, the Veterans Administration, and Tricare (medical care for active-duty military and dependents). Yet there is no access to comprehensive enrollment data of insurance and claims distributed among thousands of insurers and millions of sponsors and insureds to facilitate the required billions of queries.
At the heart of such problems, a continuing fundamental and very costly issue for the health insurance industry is the difficulty of determining which of two or more of a person's health insurance providers is primarily responsible for a medical bill. Determining the correct primary and secondary payers is commonly referred to as the primacy problem. A very recent GAO report (GAO 06-862) estimates that losses to Medicaid from the primacy problem alone exceed $60 billion per year, from the systematic avoidance of claims by the for-profit insurance industry, merely from the lack of a centralized, pre-emptive means of determining primacy.
Primacy determinations by individual carriers, while theoretically possible, leads to conflict of rules, impossible outcomes, and such failures in primacy determination nullify any benefits reaped by any electronic processes designed to speed e-commerce and thereby constrain the growth of overhead in health care.
In today's health care market, the Medicaid authorities cited by the GAO for wasting 13% of the cash in their programs to primacy errors have retained vendors to resolve this problem for twenty years. They expend millions of dollars of taxpayers' assets trying to collect claim payment errors of this specific type. Paid on contingency, these vendors typically abandon all but the largest claims, and so recover less than 1% of paid claims, while in the GAO study mentioned above, 13% of beneficiaries said they had private (therefore primary) coverage.
It seems clear that primacy is not a trivial problem, yet existing practices are widely recognized to be incapable of dealing with it. In a market of 4,500 commercial health insurance payers, tens of millions of corporate health plan sponsors and an estimated 10 million enrollment changes per month, primacy determination systems described or constructed to date are, according to the affidavits of experts in the trade, insufficient to accurately determine primary and secondary payers for medical costs incurred by any of 300 million persons on an ongoing basis (i.e., not with merely a snapshot of enrollment data but able to determine primacy at a rate at least that of the rate of eligibility inquiries and claims).
This is a long-felt problem in the industry. In 1993, the Workgroup on Electronic Data Interchange allocated a task group to study this problem in the run-up to the Health Insurance Portability and Accountability Act of 1996 (HIPAA). That task group found that the only economically practical way of resolving primacy was the formation of a central directory to resolve all insurances for a given patient-day. Likewise, the Office of Management in Budget testified to the Senate Finance Committee in 1995 that they envisioned an on-line, up-front query system to preempt these errors. Whether because of lack of ownership or the technical difficulties in bringing these general concepts to the market, the problem remains throughout US health care finance fifteen years later.
The magnitude of these unlawful cost transfers has large social utility: $100 billion in defalcation against government health plans implies assets sufficient to insure 20 million uninsured people in the US. Likewise, because government is the payer of last resort in most cases, the government pays a fraction of the costs of care while commercial insurers pay 150% of the costs of care on average, meaning that while the taxpayer and the uninsured are deprived of $100 Billion per year, our medical providers are deprived of rightful income at a rate of about $300 Billion per year.
Often, as in Doyle (U.S. Pat. No. 4,961,611) and Tawil (U.S. Pat. No. 5,519,607), existing systems are intended to automate parts of the claim process for a single insurance company or third party administrator (TPA). Some address processes that are limited to one part of the health care finance sequence of processes, as Gottlieb (20040073456) describes a process to recover money after its been spent, possibly by systems such as Doyle's and Tawil's. These systems, fine as they may be, merely describe the limited automation of existing processes and do not address the non-trivial additional step of obtaining sufficiently comprehensive and accurate data to provide a comprehensive test of primacy.
None of the referenced art tells us from whence or by what means the enrollment data would be obtained that one would need to compare in order to derive the primacy of two payers insuring the same person. It seems that immense value would be conveyed by a system that resolves that problem. The prior art references, when they refer to primary and secondary payers, refer only to the incidental volunteering of other health care coverage information by patients that produces the nation's existing 4% coordination of benefits rate out of 20% double coverage that is estimated to exist.
Previous attempts to improve claim resolution appear to have assumed relatively small databases of enrollment data and don't evidence appreciation of, or answers to, inherent problems of very large databases. Chief among the problems of large databases is the problem of resolving false positives—occasions when multiple persons occur under the same identifiers. Identifying data of people, such as names, birth dates, birth places, spouse names, etc., is often not unique. Resolving ambiguous identification of persons requires the non-trivial step of recognizing the ambiguity in the first place. Systems without access for comprehensive enrollment data for substantially all insureds simply lack sufficient resources to recognize such identification ambiguity.
Conventional systems appear not to resolve these false positives. Identifying the wrong “John Smith” importantly corrodes the fiscal integrity of these systems by transferring medical costs to the wrong health plan. And the problem is enormous. There is a need to resolve primacy on a day-to-day basis for 300 million Americans, with considerable overlap to 20 million Canadian and 20 million Mexican insureds.
We have an American health care system that permits suspect business practices, stymies efforts to force compliance with government regulatory efforts and whose costs are increasingly insupportable. It is imperative that this downward spiral be arrested.
Therefore, the clarity and effectiveness of a new blueprint for this process, under current law and consistent with current business needs, is an immediate and vital national interest.